After yesterday’s Fed rate hike, attention could shift overseas Thursday as the European Central Bank announced a target date for ending its bond-buying program and economic numbers from China came in below expectations. Stocks in Europe and Asia moved lower early in the day, apparently in sympathy with Wednesday’s late U.S. sell-off.

U.S. stocks posted slight gains in pre-market trading after the ECB news and as investors continued to digest Fed Chair Jerome Powell’s upbeat economic comments yesterday. The market fell late Wednesday after the Fed indicated it could raise rates twice more this year, but investors shouldn’t forget how positive Powell sounded about U.S. economic progress.

Moving Out: ECB Sees Bond-Buying Ending in December

People waiting for signals from the European Central Bank (ECB) finally received some early Thursday when the ECB said its bond-buying program will probably end in December. This news wasn’t unexpected, but the tapering plan appears like it’s going to happen a bit quicker than some investors might have expected, and the euro fell vs. the dollar in the minutes after the announcement.

The ECB has been spending about $35 billion a month as part of quantitative easing (QE), a program where central banks purchase government securities to try and keep interest rates low and pump up the economy. U.S. stocks appeared to get a boost from the ECB news in pre-market trading, maybe because if Europe’s economy is improving enough for the ECB to taper, the implications might be good for U.S. exports.

Turning further east (or west, if you prefer), China's industrial production for May came in below analysts’ expectations at 6.8%. Fixed asset investment and retail sales also fell short of forecasts. Retail sales increased 8.5%, which might sound like a lot for the U.S. but was below the 9.4% recorded in April. Investors might sometimes take for granted what seems like endless growth in China’s economy, but keep in mind that just a few years ago shakiness there helped inject fear into U.S. markets. This is just one month of data, so there’s probably no need to panic. However, it puts more focus on how the data look next month.

We’re not done yet with central bank meetings, by the way. The Bank of Japan is next on the calendar. Its meeting ends tomorrow.

Rate Hike Redux

The key thing to consider about yesterday’s Fed rate hike might not be the hike itself—which was widely expected—but the words Fed Chair Powell used to describe the economy. Powell said the economic data is really good and the economy is doing well. He’s right. Employment looks strong and the recent earnings season also surpassed most analysts’ expectations. We could see good earnings again when the next earnings season starts, and that’s right around the corner. Retail sales for May, announced early Thursday, jumped 0.8%. That was the biggest gain since last November and could be another sign of economic vitality.

The only wild card seems to be inflation. Powell said in his press conference Wednesday that inflation has moved closer to the Fed’s 2% goal, but warned that it’s too soon to “declare victory” over low inflation. He also seems to be trying to prepare the market in case inflation starts to go higher, and that might be one reason the Fed announced it’s going to hold press conferences after every meeting starting in January.

The fear at the Fed could be that when inflation comes, it might come so quickly the Fed might have to act quickly. The Fed might have to get out in front of inflation by adjusting policy in a much more rapid way, and might need to communicate reasons publicly. That’s why a press conference with every meeting could come in handy. Though the economy looks pretty good now, we know it’s not a perfect world.

Another thing to remember as the Fed meeting recedes and the other central banks make their decisions is that nothing the Fed does is in a vacuum. The ECB’s tapering of QE could affect the U.S. Don’t forget, too, that Brexit is yet to be determined and could also have an impact on monetary policy and intra-European trade.

What one central bank does affects the others, and there are a lot of things under the surface that can affect rates overall. As an investor, don’t operate under the assumption that if you know the consumer price and producer price index and what the payrolls data were on the first of the month you’ll know what the Fed is going to do. There’s a lot more going into the decisions Powell and company make.

Hawkish Fed Tone Takes Toll on Market

The Fed’s more hawkish tone Wednesday seems to have many investors now expecting four rate hikes instead of three this year, and that might have weighed down the stock market late in the day. Almost every sector sagged, but the more rate-sensitive ones suffered most. Telecom, for instance, had been dragged down earlier in the session in part by weakness in AT&T shares after a judge approved its merger with Time Warner. However, the Fed decision appeared to deal telecom a real body blow as the sector ended up falling a steep 4.5% by the end of the day. Telecom is sometimes thought of as a “defensive” sector that investors gravitate to in harder times to take advantage of high dividends, but if rates rise, those dividends might not look as appealing.

Financials initially seemed to get a boost from the rate hike, but finished slightly lower. So did technology, which earlier had been up amid strength in Netflix. The Netflix strength might have reflected optimism about the media sector after the approval of the AT&T and Time Warner deal.

Home builders also took it on the chin Wednesday after weekly mortgage applications fell and an analyst note came out with lower expectations for the sector. The real estate sector plunged Wednesday, hurt in part by the chance for more rate hikes which could make mortgages more expensive.

Figure 1: Where Next? With some exceptions, the U.S. dollar index (candlestick) and 10-year Treasury yields (purple line) have tracked pretty closely the last three months. Both started this period at relatively low levels and then rallied amid strong U.S. economic data and signs of a more hawkish Fed. With the Fed indicating more possible rate hikes, the question is whether either the dollar or yields can find a way to move out of the ranges they’ve occupied over the last month or so, and what impact that might have on the stock market. Data Source: ICE, CME Group. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.thinkorswim

Media Merger Mania Underway? The AT&T-Time Warner merger news this week could mean more media deals coming down the pike, analysts said after a judge ruled in T’s favor. The question is which companies in the space might want to snap up which others, with a bunch of names being floated as both possible acquirers and possible acquirees. However, if you’re an investor, it’s important to stop and think before getting too caught up in the excitement. Remember what the judge in this case said: This is just one decision. That might be read as meaning it’s not necessarily a license for every big media company to start working the phones. The 18-month odyssey it took to arrive at this conclusion for T might also give some companies pause.

That said, there’s widespread agreement among industry watchers that increasingly, content creation and distribution needs to be combined, The New York Times noted. That likely means more mergers. The next step is to watch is how this approval might affect the battle between Comcast and Disney for some of 21st Century Fox’s assets, and to see if any other big media companies like Alphabet, Facebook, and Apple start sniffing around.

Millionaire Millennials: According to survey results out Monday from TD Ameritrade, about half of people between the ages of 21 and 37 expect to eventually become millionaires (or already are). The survey of about 1,500 American Millennials asked them at what age, if any, they thought they would officially earn the millionaire label, and 53% said they believed they’d become millionaires in their lifetimes. While not all Millennials can necessarily become millionaires, as a long-term investor (whether you’re a millennial or not) , you should set yourself up for potential success by saving for retirement and looking into 401(k) options as soon as possible. Success doesn’t happen because you woke up one day and made a million dollars. For most people, it’s because they saved. They set money aside when they were 25 for when they were 65.

What’s Normal? It’s unclear if the Fed (or anyone) truly knows what a normal rate environment might look like. That became clear during Wednesday’s post-Fed meeting press conference with Fed Chair Powell, who was asked that very question. “We know we’re getting closer (to neutral), but we don’t have an exact sense of where that will be,” Powell responded. The Fed, he added, will “try to keep our minds open” as more data come in. However, he added, “there’s always wide uncertainty” around the natural rate of unemployment and the neutral rate of interest. The Fed, as we noted yesterday, is concerned about choking off the strong economy, but also wants to keep inflation from rearing up. A “neutral” interest rate would be one where both of those goals would be supported. The rate hikes are a sign that the Fed likes what it’s seeing in the economy, but it doesn’t seem so clear about what rate might be the right one to balance strong growth with price stability.